First Quarter Sees Record Revenue

Microsoft reported record quarterly revenue (US$7.75 billion) and its second-highest quarterly profit ever (US$2.73 billion) in the first quarter of fiscal year 2003, which ended Sept. 30, 2002. This growth was driven in large part by the recognition of unearned revenue from sales of multiyear licensing agreements in previous quarters.

Meanwhile, Microsoft’s stash of unearned revenue continued to grow as companies raced to sign multiyear licensing agreements before a July 31 deadline, providing Microsoft with a buffer against a drop in sales the next few quarters. But this unearned revenue growth is expected to end now that the deadline has passed. The company’s future results could also be negatively affected by the growing popularity of Linux in the enterprise space and by Xbox inventory and supply chain complexities.

(For an overview Q1’03 financial results and how they compare with previous quarters, see the chart “Microsoft Financials for the Last Five Quarters“.)